Entrance Examination, June 2011
M.PhiI and Ph.D. (Economics)
Time: 2 Honn Maximum Marks: 75


HALL TICKET NUMBER


INSTRUCTIONS

J.
Rad these iOltructloDJ carefully before .oowerlog.
.

2.
Enter your Hall Tieket Number on this also on the OMR
answer sheet.
3.
Answers are to be marlced on the OMR answer sheet following the
instructions provided there upon.
4.
Handover!ll!lh the question paper booklet and the OMR answer sheet at
the end ofthe examination.
5.
Use ofnon-programmable calculators is allowed.
6.
The Question Paper has!l!!!parts-PART-A and PART-B. There are
75 questions in this paper: 2S questions in PART-A and SO questions in
PART-B. Marks obtained in PART·A will determine the merit rank in
case of a tie in the total number ofmarks obtained.
7.
Each correct answer carries
mark.
8.
Tbere Is negative marldog. Eacb ",rong ......or carrlel .0.33
marks.
9.
This question paper contains 14 pages excluding the cover page.




o.p.rbs..t orEco....1a
MaLM.....:75


Palt-A (Auwer llIJ 25


I. A single Sood economy is one in whicb
A. IbeR is no labour.
B. there is one consumption sood.
C. there is one capital Sood.
D. there is one sood wbich serves Iioth consumption and investment,
2. Which orthe followinS distinsuishes Neo·<:Iassical economics fiom Classical economics?
A. MethodoJosicallndividualism
B. The Maximization assumption
C. The concept ofHomo cconomicus
D. All ofthe above
3. AccordinSIo Ricardian theory ofrent, rent arises due to
A. ownership Riptsofthc: Landlords.
B. scan:ity oflabour.
C. nissardJiness ofnature:.
D. contribution ofl8lldlords 10 production.
4. A country srowins at per annum will double its income in
A. 10 years
B. 14 years
C. IS years
D. 20 years
S. In a neo-classical model ofJ!fOWlb, ifa constant rate ofprotit is associated with • fallinS
output-capital ratio, it is indicative: of
A. labour-savins ledmical prosress.
B. capital-savins ledmical prollft:SS.
C. Harrod-IIeutraI teclutical ptOllft:SS.
D. labour ausmentins ledmical prollft:SS.
6. In Monetary theory, wbich ofthc: followinS thinkers would come close to asreement?
A. Keynes and Marx
B. Keynes and Miltoo Friodman
C. Keynes and Lucas
D. Keynes and
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7. For Keynes, in General Theory, employment is determined by:
A. the intenec:tion of labour demand and labour supply.
B. the Quantity theory ofmoney.
C. natural rate ofunemploymenl
D. product market equilibrium.
8. Suppose you are president and your advisors give you an econometric estimate ofthe outputinflation
trade-off. To your surprise, when you try using this estimate to make policy. you find
the aetuaJ tradeoff is larger. This situation is an example of
A. time inconsistency.
B. discretionary policy.
C. a political business cycle.
D. the Lucas critique.
9. In New Classical Models, which ofthe following is true?
A. Money is not neutral, so real output is affected by money.
B. Money is neutral, therefore it does not affect real output.
C. Money is neutral but it affects the real output due to price-surprise effects.
D. Money is not neutral, so it affects real output due to price-surprise effects.
10. With almost negligible growth in total factor productivity, India's post-reform economic
growth is sustained by:
A. robust growth ofexports.
B. robust growth of foreign exchange reserves.
C. massive surge in domestic capital fonnation.
D. massive public expenditure.
II. Structural inflation in India is related to:
A. faster monetary expansion.
B. ponr agricultural performance.
C. fiscal deficit.
D. balance of payments problems.
12. Buffer stocks are maintained by FC( to stabilize:
A. food subsidies.
B. public distribution.
C. food grain prices.
D. all oftbem.
13. Land reforms are considered important in increasing agricultural producrion because:
A. it is fundamentally egalitarian and eradicates poverty.
B. it removes intermediaries and provides market access to farmers.
C. ittransferstheconrrol ofproductiveassetsintothehands ofactualproducer.
D. it enables government to inrroduce supportive programs.
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14. A model of IlIle-COmer economic development is provided by:
A. Albert Hinchman.
B.
Arthur Lewis.
C. NuOOe.
D.
Alexander Genchenkron.
JS.
When RBI carries out a sterilized foreign exchan&" intervention, its tzansaetions

A.
leave the domestic money supply WlChanged.
B.
in....-the domestic money supply.
C. decreaK the domestic mooey supply.
I). None ofthe above.
16. Amanya Sen's showed that famines oa:urmI more often due to:
A.
crop failures.
B.
desertification.
C.
loss ofentitlements.
D.
natural calamities.
17. The following type of labour migration is the largest in India:
A.
intra-rural migration.
B.
intra-urban migration.
C.
rural-urban migration.
D.
urban-rural migration.
18.
Under perfectly flexible exchange rates, changes in the balance oftrade
A.
do not a/Tcct the domestic money supply.
B.
a/Tect the domestic money supply.
C.
affect the rate ofinterest alone.
D.
affect both the domestic money supply and rate ofinterest.
19. In the presence ofhetcroscadasticity, the OLS estimators are:
A. unbiased.
B. efficient.
C. non-linear.
D. highly significant.
20. A sufficient statistic implies that
A.
it contains all relevant infonnation avai1.t>le in a -.ple.
B.
it conIains all relevant information needed to solve the resean:h problem.
C.
itcontains sameamountofinformationir,espectiveofthe-.plecbosen.
D.
it all information ofthe population.
21. Which ofthe following is true for a marl<et allocation (i.e. for a competitive senoral
equilibrium)?
A.
It is Pareto optimal in the presence ofa extemality in consumption and absence of
extemality in production.
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B. It is Pareto optimal in "",.enceofpositive externality in production
C. It is Pareto optimal in presence ofpositive extemaJity in consumption.t. production
D. It is Pareto optimal in obsence ofan externality in consumption end production.
22. lnespective ofwhat the original distribution may be, as the sample size increases, the mean
value ofthe relevant varioble behaves like a
A. binomial diSlribution.
B. 08ussian distribution.
C. uniform dillribution.
D. Bernoulli distribution.
23. Consumption function for an economy is given by: C 137 0.6 where C is
consumption and v" is disposable income given as: Y" 0.9 Y. Then expenditure multiplier is:
A.2.5.
B. between 2.6 and 3.0.
C. below 2.4.
D. above 3.0.
24. Whieh ofthe following actions is an example ofexpansionary fiscal policy?
A. A deel'Cll¥ in welfare payments.
B. A purchase ofgovernment securities in the open market.
C. A decrease in the Bank rate.
D. A decrease in the corporate profits tax 1'Il1es.
25. The natural rate ofunemployment is generally thought ofas the
A. ratio ofthe frictional unemployment rate to the cyclical unemployment rate.
B. sum ofstructural unemployment and cyclical unemployment.
C. sum of frictional unemployment and cyclical unemployment
D. sum of frictional unemployment and structural unemployment
Part·B (Auwer aD 50 Q...tlou)

26. Crowding-cUl occurs
A. when expansionary fiscal policy causes interest rates to rise, thereby reducing private
spending, particularly investment
B. when COlItJaetionary fiscal policy causes interest I'Il1es to decline, thereby increasing
private spending, porticuIarly investment
C. when tight nIOIIdary policy canses interest I'Il1es to rise, thereby reducing private
spending, particularly investment.
D. all ofthe above.
27. Demand pull inflation be caused by:
A. An increase in coSlS.
B. A reduction in interest rate.
C. A reduction in government spending.
D. An outward shift in aggregate supply.
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2S. The Mundell-Tobin effect claims that modenlle inflation would lead 10

A.
a fall in the I1IIe of interesl and a riae in the rate of investmenl.
B.
a fall in produclion.
C.
a fall in money holding.
D.
all the above.
29.Theeffectsofinflationonthepricecompetitivenessofa country'sproduclsmay be otraet by:
A.
An appreciation ofthe cumncy.
B. A revaluation ofthe currency.
C.
A depreciation ofthe currency.
D.
Lower inflation.
30. India's current exchange rate poli<y can best be described ss
A.
a fixed exchanse rate.
B.
a perfectly flexible exchange rate.
C.
a managed float.
D.
a pegged exchange rate.
31. Which ofthe following statements is TRUE?
A.
The hypothesis that poor countries tend to row faster than rich ones and hence will
catch up is ",fened to as "Conditional Convergence".
B.
The key property ofendosenous srowth models is the absence ofdiminishing returns
to capital.
C.
In the Solow model, the larger is the savings rate, larger will be the equilibrium rate
ofgrowth ofper capita income.
D. In the Harrod-Damar Model, ifwarranted rate ofgrowth is I... than the expected rate
ofgrowth, than the actual rate ofgrowth will be less than the expected I1IIe ofgrowth.
32. Which ofthe following is NOT a component ofthe Human Development Index?
A.
Life expectancy.
B.
GNP per Capita.
C.
Infant Mortality Rate.
D. Liteney Rate.
33. What conclusion can be reached from the following data on income shares?
. ed b
Lowest 40%

o mcome recelV
Hillhes! 20%
Banaladesh

3?9
Indonesia

22.9

40.7

21.0

A.
:Absolute poverty is mOlt' widespread in Bangladesh.
B.
The size distribution oflncome is unequal in Indonesia.
C.
Bangladesh has adopled a strategy ofre-distribution wiIh srowth.
D.
Bangladesh is growing ra--than IndonesiL
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34. The theory ofWlder coosumption is primarily associated with the name of
A. Karl Marx.
B.
PauISw=<y.
C.
V.1. Lenin.
D.
Rosa Luxcmbura.
35. Which ofthe following i. NOT a characteristic ofRuraJ Credit Mabts in India?
A.
Tendenc:y towards segmentation.
B.
The lack oflnterlinked credit markell.
C.
In_rate variation.
D. Wide spread ..uoningofcreditatthe goingrateofinletelt.
36. Ifthe conditions ofthe Heckscher-Ohlin theorem hold, with factors being immobile between
countries, and incomplete specialization within countries, free tnde will
in:
A.
equalization of..,lative factor prices.
B.
increase in ..,Iative price oflabor in the capital-rich country.
C.
increase in the ..,Iative price ofcapital in the Iabor-rich country.
D.
widening ofthe gap between ..,Iative factor-prices in the two countries.
37. The effective rate ofprotec:tion measures how much
A.
Investment will be drawn into the protec:ted industry.
B.
Profill can be earned by producing the protected product.
C.
The marain ofprice over input cost for domestic produ<:Cn can exceed the margin at
world market prices. .
D.
Thepriceoftheproductincn:ases duetothellriff.
38. To minimize deadweight efficiency Iosaes, protection for infant industries should be provided
through
A.
Subsidies.
B.
Quotas.
C.
Tariffs.
D.
an overvalued exchange rate.
39. The Tullock n:ctanale which..-.urea the value ofmonopoly profill is associated with
A. theory ofNaluraJ Monopoly.
B.
theoryofa perfectly discriminating Monopolist.
C.
rent seeking behavior.
D. weltilre loss due to a monopoly market.
40.
The Marshall-Lerner condition states that for devaluation to have a positive effect 011 a
country's trade balance,

A.
swn ofthe elasticitiesofdemand for a country'. expons andofill demand for
impolt. has to be greater than unity.
B.
sumoftheelasticitiesofdemandfora country'.exporllandofilldemandfor
imporll has to be leas than unity.
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C.
sum ofthe eluticities ofdemand for • country's exporla and ofill demand for
imports hu 10 be equaJ 10 unity.
D.
sum ofelasticitiesofdemand for • country'. exporta and ofita demand for impom
hu10 be equaJ 10 zero.
41. Which ofthe following ahould be classified u • non-tndable?
A RwalIOlld conlrIIction services.
B.
Wheat production wholly COIla"""" wilhin the country.
C.
Computer equipDent tbat ClIIIDOl be produced locally.
D. All the above.
42. The limit ofthe functiOll, • x)u x I,is
Al
B.O
C.
00
D.
Indeterminate
43. Let Xi, pi) be the prices and quantities in the yeart and let be
the quantities and prices in the hue year. A situation where the Pauche quantity index is greater
than I implies lhat:
A


B.
P1'x1b pztXzb P11X.1 P2tXZl
C.

D.
pixi
44.
matrix, is equal 10:
6
J54
4 -82

l

A2

B.
3
C.
4
D.
0
45.Given.UtilityfunctionU-XVwithprices ofthecommodities p.andPyandthe incomeof
the COllJUIIICI" iJ and where U" iJ the value ofU lhat solves Max U subject 10, X p. Y PyM,
the H"dsian compensated demand fimctiOII for X iJ given by:
A
.

B.
X_{U"Py
C.

D.
X=U"P./Py
46. The measures ofManballian Consumer Swplus, CompenUlled Variation in income and
Equivalall Variation in income coincide if
A the Utility function iJ quasi-lineR.

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B. the substitution effects ..... ......,.
C. the income eluticity ofdcmmd for the good is perfectly elulic.
D. the eluticity ofdenuIIId for the good is lesslb8n unity.
47. lfa conswner has a utility function Uex" Q Then the fraction ofincomelll8t he
spends on is,
A. 415
B. 1/5
C. 1/4
D. UndetermiMble. Requires lIlIditional infonnation on prices.
48. The derivative ofthe lUnction: Y is Biven by:
A.
B. 3.5
C.3.75x'-4X'
D.
49. Given the demand function P -42 -5Q Assumin8that equilibrium price is the value
ofthe consumer's surplus is:
A.80

B.
C.
D. 86
50. Your vote is one in a million and the probability of il affecting the outcome of an election is
ne81i8ibly small. The Rational Choice Iheory based on self-inlercSl would prcdicllhal
A. you would gather olhers like you to support your choice.
B. nobody would vote.
C. everyone would vote.
D. you would form your own political party.
51. A strong Natural Monopoly is defined as one that
A. CIIlDOI cover its costs ofproduction under M8rginaI Cost pricing Nle.
B. can cover its costs ofproduction under the M8rginaI cost pricing rule.
C. is sustainable against entry.
D. can make supernormal profits and still not 8IIr1ICI entry.
52. An explanation ofwhy stock returns consillcnlly returns is liven by:
A. The Risk Aversion Hypotbesis
B. Loss Aversion Hypothesis
C. Status Quo Bias Hypothesis
D. Risk taking behaviour
53. In the treatmenl of inter-temporal choice, the statiOlUll'Y property ofthe discounted Utility
appl'OllCh implies that:
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X


A.
The choice between two Slm:s ofthe world x IIld wherein you are iDdimrent
between the two II lime llIld remains the sane for any llIld I).
B.
The choice between two Slm:s ofthe world x IIld wherein you are indifferenl
between lbe two II lime I and """Ii.. only to lbese two periods.
C.
The discount factor diftm for ditrmott lime periods.
D.
The discounl factor is equaJ 10 unity.
54. The Iong-nm cost fimc:lion for ach firm thai supplies the 0UlpUt YisllivenbyC_
8Y. Ifaqrepte demand for lbe DUlpUI is given by Y -2000 -lOOP, the equilibrium number
offmns in a lXJIDpelitive industry will be equal 10
A.
100
B. 200
C.
500
D.800

55. The relative extremum ofthe funclion,
A.
0CXiU!S at X and it is. relative minimum.
B.
occurs II x -II8I1ld it is an absolute minimum.
C.
occurs at x 6 and it is. relative maximum.
D..does nOl exist.

56. Which ofthe following is lrUe?
A.
Becanse!here are no trlnsoction costs,!be oIlocmenl ofpropelty rights is necessary in
arriving alan efficient bargsin solution.
B.
Institutions do notl1llller in a Walrasian world.
C.
Instilulions do miller in a Walrasian world.
D. All are lrUe SlIlcments.

The Quadratic form: Q 6XY-8XZ-2YZis

A. Positive definite
B. Negative Definite
C.
Positive Semi-<lefinite
D.
Indefinite
58. Which of!be following-..is 'Jll.UB oI3out the Harris-Todaro model on ruraJ-urban
migJaliori?
A.
Creating newjobs invariably reduces wban IIIleIIlployment.
B.
The wban wage bas a Iowa-bound which is lower !ban the ruraJ wage.
C.
The diJecl policy ofcuring wban unemploym<nl by employing more people in lbe
wban may ma-unemployment.
D.
Workers are assumed to act in ways tbIl maximize their voIue ofwban earnings.
59. Tradilionol arguments ofSmitb and Marshall tbIl explain slagnIlioo in agricullUre argue tbIl,
A.
tenants in a fixed tenancy system will be Jess likely to undertake innovations when> u
a share tenancy would be subject to innovations.
B.
a landlord will not undertake innovllions u it mighl very well lower bis nat income.
9


c.
share terwIcy would be re1lltively stqnant IS compered to a fixed tenancy sysICm.
D.
a landlord will UlIdcrtake innovatiOllJ as it will i....-his net income.
60. Milton Friedmlll's criticism ofthe inflllt industry lJ'IlUltIent that ifexpectalion ofsuccess is
realistic, then they should be prepared to take lones presumes that,
A.
capital marl<ets are peIfect.
B.
labour marlcds are perfect.
C.
the teehnoIogy ia scale neutral
D.
ellll"P'eneurs are risk taken.
61. The cost fimction given by: y'l4
A.
only exhibits economies ofscale for all output levels but dioeconomies ofscope.
B.
only exhibits economies ofscope but diseconomies ofscale.
C.
exhibits neither economies ofscope nor economies ofscale.
D.
exhibits both economies ofscope IIId scale.
62. Hotellings theorem states that ifthe expenditure function is differentiable iIlen
A.
the Marshamlll demllld functions are obtainable by partial differentiation ofE(.) with
price.
B.
the Hicksian compensated demand functiOllJ are obtainable by partial differentiation
ofE(.) with reference to qUlntity. .
C.
the Hicksian compensated demand fimction are obtainable by partial differentiation of
with reference to price.
D.
the indirect utility funcrion is obtainable by partial differentiation ofE(.) with
reference to price.
63. The regression equation necessarily represents
A.
the correlation between variables.
B.
causality between variables.
C.
111 economic identity.
D.
a qUlntitative relationship between variables.
64. In statistical testing ofhypotbcsis, Type-II error men to
A.
the probability ofrejecting the null hypothesis when it ia true.
B.
the probability ofaccepting the null hypothesis when it is true.
C.
the probability ofaccepting the null hypothesis when it is false.
D.
none ofthe above.
..

65.
If Y e •then x is equal to
A.
log,(log,
B.

C.
D.
loa, Y
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66. You have a 10,000 deposit in a US bank. The rate of interest in USA is
1000A., and the ReI$ exchange rate moves from Rs. 50 per to Rs. 51 per
over the year. The Rupee rate of",tum on your fo",ign deposit is
A. 12%
B. 20"A.
C. 10%
0.2%
67. The variance of 4 is
A. ,fi9
B.2/3
C.
Gt

D. 0
68. Multi-<:ollinearil)' problem arises due to
A. correlation oferrors.
8. correlation between explanatory variables and error terms.
C. correlation between dependent and independent variables.
D. correlation among explanatory variables.
69. Let X be a variable with mean, and standard deviation, s. If a constant is now added to
each observations on then the mean and standard deviation ofthe variable arc:
A. m,s
B. S
C. s+c
D. m s c/n
70. In a linear homogeneous production function, the sum of output elasticities with respect to
inputs must be:

A. Unity
B.Zero
C. Negative
D. Greater than one
71. The CPI has increased from 300 to 330 and money wages for agricultural labour bave
increased from Rs. 40 to Rs. 47 per day. Which ofthe following is necessarily lnIe?
A. Agricultural wage employment has increased.
B. Real wages have increased.
C. Proportion ofpersoos below poverty line has declined.
D. Labour productivity has inc"'B5ed.
72. What is the probability ofa sum ofnumbers in two throws ofa dice being
A. 1/36
B.11I8
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.


C.I/9

0.116

73. The
is
A. negative definite
B. positive definite
C. indefinite
O. none of the above
74.IfA and Baretwoeventswithprobabilities ofoccurrenceas
and P(AnB) then P(AIB) is
A.1/3

B. 1/2
C. I
D. 0
75. Which of the foll<)wing is not a necessary condition for the OLS
estimator to be BLUE?
A. The error tenns have zero mean.
B. The error terms are independently distributed.
C. The error terms have identical distribution.
D. The error terms are normally distributed.
12